ARIAD Pharmaceuticals' (ARIA) CEO Paris Panayiotopoulos on Q2 2016 Results - Earnings Call Transcript

| About: ARIAD Pharmaceuticals, (ARIA)

ARIAD Pharmaceuticals, Inc. (NASDAQ:ARIA)

Q2 2016 Earnings Conference Call

July 28, 2016 8:30 AM ET


Liza Heapes - Senior Manager, Corporate Communications

Paris Panayiotopoulos - President and Chief Executive Officer

Manmeet Soni - Executive Vice President and Chief Financial Officer

Jennifer Herron - Executive Vice President and Chief Commercial Officer

Timothy Clackson - President of Research and Development and Chief Scientific Officer

Hugh Cole - Vice President and Chief Business Officer


Eun Yang - Jefferies LLC

Chris Shibutani - Cowen Group, Inc.

Katherine Xu - William Blair & Company, LLC

Anupam Rama - JPMorgan Chase & Co.

Jue Judy Liu - RBC Capital Markets

Bryan Czyzewski - Barclays Capital


Thank you for holding for ARIAD Pharmaceuticals Second Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal report ARIAD management will open the lines for a question-and-answer period. Please be advised this call is being taped at the company’s request and will be archived on the company’s website for three weeks from today.

At this time, I would like to introduce Ms. Liza Heapes, ARIAD’s Associate Director-Corporate Communications. Please go ahead.

Liza Heapes

Good morning. And thank you for joining us as we report our financial results for the second quarter of 2016. Joining me this morning are Paris Panayiotopoulos, our President and Chief Executive Officer; Manmeet Soni, our Chief Financial Officer; and Dr. Tim Clackson, President of R&D and Chief Scientific Officer; Jennifer Herron, our Chief Commercial Officer; and Hugh Cole, our Chief Business Officer.

During this call, please note that we will be making forward-looking statements. Please note that these statements are subject to factors, risks and uncertainties, including those that are detailed in our Form 10-K for the year-ended December 31, 2015, as well as our subsequent SEC filings that may cause actual results to differ materially from those results expressed or implied by such statements.

With that, I would like to turn it over to Paris, for his opening remarks.

Paris Panayiotopoulos

Thank you, Liza. Good morning, everyone. And I’m very pleased to provide you with an overview of what we believe, was an extremely productive second quarter for ARIAD, during which we took actions designed to create significant value for both our patients and our shareholders, and which further enable our vision to become the leader in rare cancer precision therapies.

In addition to Iclusig’s continuing high revenue growth, which Manmeet will detail as part of our financial review in just a few minutes, we also created a number of other value catalysts in Q2, so just a recap on those.

First, we decided to divest our EU operations and license the European rights for Iclusig to Incyte which significantly strengthened our financials. We believe that this was a great deal as ARIAD received a $140 million upfront payment and will receive up to $14 million as cost-sharing for our Iclusig clinical studies, between 32% and 50% of net Iclusig sales in royalties, and up to $135 million in milestone payments, while also reducing our annual operating expenses by approximately $65 million.

Additionally, in Q2, we also signed to a new distribution agreement in Latin America and in the Middle East and North Africa as we aim to make Iclusig available to all eligible patients around the world.

Second, we implemented the streamlining of our organization following the end of March announcement that we would be reducing our headquarters’ workforce by 25%. Although a very difficult decision, the benefit we have seen has been both on reducing cost and on ensuring a less complex organization, more in line with a lean and agile biotech company that we aim to be moving forward.

Third, we completed the scale-up of our U.S. field organization in order to increase our promotional efforts on Iclusig, prior to the team’s preparation for the potential approval of brigatinib later this year, which Jennifer will detail in a few minutes.

Last, we now have a strong and diverse executive leadership team, which I am delighted with, made up of both new and existing team members, including the new appointments since the beginning of Q2 of Jennifer Herron, our Chief Commercial Officer, who came from BMS; Elona Kogan, our new General Counsel who came from Avanir; and Jayne Gansler, our Chief HR Officer who came from Genzyme.

Turning now, high-level to our R& D accomplishments during the second quarter, on June 17, we announced that we had initiated a rolling NDA submission to the FDA shortly after the pivotal registration data was presented at ASCO, and ahead of previously announced plan for our investigational ALK inhibitor, brigatinib, for patients with ALK positive non-small cell lung cancer who are resistant to crizotinib.

As a reminder, brigatinib received breakthrough therapy designation in this setting and was granted orphan drug designation by the FDA. We aim to complete our rolling NDA submission during this current quarter and we hope to receive a regulatory decision in the first quarter of 2017.

During the second quarter we also announced the initiation of our randomized first line Phase 3 clinical trial of brigatinib in patients with ALK positive locally advanced or metastatic non- small cell lung cancer, who have not previously been treated with an ALK inhibitor. This study called ALTA 1L is designed to assess the efficacy of brigatinib in comparison to crizotinib with a primary endpoint of progression-free survival and is expected to complete enrollment in 2018.

Also during the second quarter, long-term efficacy and safety data for Iclusig at four years were presented at the ASCO and EHA conferences from the pivotal Phase 2 PACE clinical trial of Iclusig in heavily pre-treated patients with resistant or intolerant CML or Philadelphia-chromosome positive ALL. And ARIAD has now submitted the four-year PACE data as a U.S. label supplement, with an anticipated FDA action date in the fourth quarter of this year. And Tim will shortly review both the ALTA and the PACE four-year data.

We’re very excited about the commercial prospects for both brigatinib and Iclusig. And we look ahead to 2017 when, of course subject to FDA approval, ARIAD could become a two commercial product company, with significant revenue growth potential over the next few years, driven by potential label expansions and additional indications.

Finally, looking further down our pipeline and further enabling our vision as the leader in rare cancer precision therapies, during the second quarter, we also announced the initiation of the Phase 1/2 clinical trial of AP32788, our investigational precision therapy compound designed as a targeted therapy for patients with non-small cell lung cancer with specific mutations in EGFR or HER2.

AP32788 was designed to achieve selective inhibition of these kinases with exon 20 mutations. And there are currently no approved targeted treatment options available for these patients in desperate need. We are, of course, acutely aware of this and have a sense of urgency with the aim to complete this study next year.

Notably, AP32788 represents yet another of ARIAD’s internally discovered oncology candidates, to advance into clinical development.

And with that, I will turn it over to Manmeet, who will cover our financial results; followed by Jennifer, who will give the commercial updates; and then Tim will provide the R&D update. Manmeet, over to you.

Manmeet Soni

Thank you, Paris; and good morning, everyone. Our financial results for the three and six months periods ended June 30, 2016 were presented in our press release issued this morning. Net product revenue from sales of Iclusig was $65.3 million for the second quarter of 2016, as compared to $27.8 million for the second quarter of 2015, an increase of 134%.

This increase includes one-time French revenue of $25.5 million recorded in the second quarter of 2016, upon completion of pricing and reimbursement negotiations. U.S. sales of Iclusig were $32.6 million for the second quarter of 2016 compared to $21.7 million in the second quarter of 2015, representing growth of 50% due to increases in both volume and price.

In addition, our second quarter revenue also benefited by approximately $1.4 million from an increase in the level of channel inventory from 7 business days at the end of second quarter of 2015 to 10 business days at the end of the second quarter of 2016. Going forward, we expect our channel inventory to stabilize at around 7 to 8 business days.

European sales of Iclusig recorded in our books were $42.7 million for the second quarter of 2016 compared to $6.1 million in the second quarter of 2015. European sales recorded for the second quarter of 2016 included one-time revenue of approximately $25.5 million related to cumulative shipments of Iclusig in France that was recognized upon obtaining pricing and reimbursement approvals, and approximately $7.2 million of product revenue for sales in the first two months of the second quarter of 2016.

In addition to $7.2 million of product revenue in Europe for the first two months of this quarter, we also recorded royalty revenue of approximately $1.2 million for the month of June after the close of Incyte transaction, which is recorded under license and other revenue line item.

R&D expenses were $42.9 million for the second quarter of 2016, an increase of $4.2 million or 10.6% compared to $38.7 million for the second quarter of 2015. The increase in expenses primarily relates to completing enrollment in our ALTA pivotal trial, initiation of our ALTA first-line Phase 3 trial, and continuing cost for our OPTIC and OPTIC-2L trials.

SG&A expenses were $34.2 million for the second quarter of 2016, a decrease of $14.4 million or 29.6% compared to the second quarter of 2015, reflecting a decrease in professional fees related to the proxy contest in the second quarter of 2015, and lower personnel expenses due to a reduction enforced in Q1 and the sale of our European operations to Incyte effective June 1, 2016.

GAAP net income for the second quarter was $109.8 million, or $0.56 per diluted share compared to GAAP net loss of $63.2 million or $0.33 loss per diluted share for the second quarter of 2015. GAAP net income for the six months ended June 30, 2016 was $56.1 million or $0.29 per diluted share compared to GAAP net loss of $115.8 million or $0.62 loss per diluted share for the six months ended June 30, 2015.

We generated net income for the quarter and six months ended June 30, 2016 as a result of one-time $128.7 million gain related to the Incyte transaction, which is reported as other income. For accounting purposes, we had to allocate the sales proceeds from Incyte transaction to the deliverables identified, the most significant being the license for the European directly. A gain of $128.7 million is primarily the proportional value of delivered items related to the license and European operations. The value attributed to the undelivered elements under this transaction will be recorded as other revenue for the respective performance periods.

Moving on to non-GAAP disclosure, our non-GAAP net income for the second quarter was $114.1 million or $0.59 per diluted share compared to non-GAAP net loss of $52.5 million or $0.28 loss per diluted share for the second quarter of 2015. Non-GAAP net income for the six months ended June 30, 2016 was $69.9 million, or $0.36 per diluted share compared to non-GAAP net loss of $96.8 million, or $0.51 loss per diluted share for the six months ended June 30, 2015.

Non-GAAP net income and loss excludes stock-based compensation expenses, restructuring charges, and transaction cost. Our reconciliation of non-GAAP to GAAP financial measures is included in our earnings release this morning and also on the investor section of our website. As of June 30, 2016, cash, cash equivalents, and marketable securities totaled $278.5 million compared to $168.3 million at March 31, 2016, and $242.3 million at December 31, 2015.

Note that, we also expect to receive $50 million from PDL by the end of this month based on the additional deal terms. The revised option with PDL provides us an option to withdraw up to $40 million in July 2017 if needed.

Now moving on to our financial guidance for year 2016, we are reaffirming our previous guidance for revenue, expenses, and year-end cash balance. As a reminder, our product and royalty revenue guidance for 2016 is $170 million to $180 million. R&D expense guidance is $175 million to $180 million. SG&A expense guidance is $120 million to $125 million.

Our product revenue guidance includes the sale of Iclusig in the United States for the full year 2016, sale of Iclusig in the European territory until the close of the Incyte transaction, followed thereafter by royalties on the net sales generated in the European territory, along with the cumulative French revenue recognized. We’re also reaffirming that our cash, cash equivalents, and marketable securities at the end of 2016 are expected to be in the range of $280 million to $290 million, which includes $50 million to be received in the third quarter as per our royalty financing agreement with PDL.

With that, I will now turn the call over the Jennifer who will provide an update on commercial efforts. Jennifer?

Jennifer Herron

Thanks, Manmeet, and good morning, everyone. I’d like to start the commercial update with a brief reminder of our ARIAD commercial priorities. The ARIAD commercial organization is committed to driving continued growth of Iclusig, to accelerating launch readiness in preparation for a flawless launch of brigatinib in the U.S., and to the continuous optimization of our commercial model and customer-facing execution.

With regards to our commitment to the continued growth of Iclusig, Q2 represents a strong first step towards a series of quarters and years of sustained growth, with U.S. sales of $32.6 million for the second quarter of 2016, representing 50% growth versus the second quarter of 2015 with 31% driven by volume growth.

We believe this growth has resulted from increased share of voice as the field force was expanded last year, increasing physician trial and positive physician experience with Iclusig, and ultimately increasing prescriber confidence. We expect that as physician experience and confidence increases, we will see increasing durations of therapy. We have also increased patient support and outreach programs to maximize the benefit appropriate patients receive from Iclusig.

Continued growth of Iclusig going forward will come from four main drivers - the field force expansion effective in early July of this year and the resulting increasing share of voice, the U.S. label update to include the four year clinical data from the PACE trial anticipated by the end of Q4, increasing prescriber experience and confidence to support new patient starts, and increased patient support for new and continuing patients.

Turning to our commitment to a successful launch of brigatinib in the U.S., one prioritized area of commercial focus and investment has been to support healthcare provider education about the unmet medical needs in patients with ALK positive lung cancer, predominately the development of resistance and CNS progression. The disease awareness campaign has resonated very well with providers, and has sparked interest to understand more about the risks inherent in ALK positive disease.

At ASCO, the disease awareness campaign execution led other competitors in this space in terms of memorability, interest, and message recall. In other preparations, we have completed the expansion of our customer-facing teams, both sales and medical, and are completing the overall commercial organization expansion to support the evolution of our organization from a one-product company to a company with a focused portfolio of products in areas of high unmet medical need.

The commercial team is assembled, focused, and poised to execute with urgency. In addition to a comprehensive medical plan, our post-launch commercial efforts will include maximizing the awareness of brigatinib’s robust clinical data, supporting appropriate patient selection, providing best-in-class provider and patient support services, and supporting lifecycle management efforts.

In summary, the ARIAD commercial organization is poised to compete successfully in our markets in the U.S. and around the world. We are confident in our continued growth trajectory of Iclusig worldwide, supported by our increased U.S. focus and the strong performance of our commercial partners around the world. We are confident in our U.S. organization and our plans to execute a flawless launch upon approval in Q1. And we will continue to evolve the commercial model to maximize the value we bring to physicians, to shareholders, and most importantly to patients in need.

I will now turn the call over to Tim.

Timothy Clackson

Thanks, Jennifer, and good morning, everyone. We are very pleased with the substantial progress we made during the second quarter across all our lead programs in R&D, in particular with brigatinib and a successful pivotal trial that served as the basis for our ongoing NDA filing. As well as with compelling four year data for Iclusig from the PACE study, and advancement into the clinic of AP32788, our targeted therapy for specific mutations in EGFR and HER2 genes in lung and other cancers.

I’d like to briefly recap the highlights of positive data that were presented at ASCO last month from the pivotal ALTA trial, which tested brigatinib in 222 patients with ALK positive non-small cell lung cancer, who had experienced disease progression on the first-line agent, crizotinib.

The primary endpoint of the ALTA trial was investigator assessed confirmed objective response rate, as measured by RECIST criteria. The result of the ALTA study showed a 54% confirmed objective response rate and 12.9 month median progression-free survival, based on 8.3 months of median follow-up for the patients in the higher dose arm, a 180 mg. As well as a 67% confirmed intracranial objective response rate in patients with measurable brain metastases.

Notably, median intracranial PFS for patients with intracranial CNS metastases at baseline was not yet reached in the 180 mg high dose arm. Overall, the safety profile was similar to that observed in the earlier Phase 1/2 trial. Brigatinib appear to be generally well tolerated with treatment-related adverse events that were manageable.

With respect to pulmonary events, a subset of Grade 3 plus pulmonary adverse events with early onset occurred in 3% of all patients. But notably, no such events with early onset occurred after dose escalation to 180 mg. These data are the basis of our ongoing rolling NDA submission, which we expect to complete this quarter as Paris mentioned.

We are seeking accelerated approval for brigatinib from the FDA and we plan to request a priority review of the application. We believe these data position brigatinib favorably as a differentiated therapeutic option in the ALK positive lung cancer space. As a reminder, in preclinical studies, brigatinib has the profile of a pan-ALK inhibitor with substantial activity against all tested ALK mutations that have been linked to resistance of other inhibitors.

Consistent with this, at ASCO, clinical data were also presented based on ALK mutation status as determined by next generation sequencing of tumor tissue collected from the ongoing Phase 1/2 and ALTA clinical trials. These data showed that brigatinib yields confirmed responses in patients with multiple different secondary ALK mutations, including one case of the G1202R mutation.

There are no currently approved ALK treatments that have demonstrated activity against the G1202R mutations. Also at ASCO, updated data were presented from the ongoing Phase 1/2 study of brigatinib in lung and other cancers. In the 71 patients with ALK positive non-small cell lung cancer, the confirmed objective response rate was 62%. The waterfall plot demonstrating tumor shrinkage in nearly all ALK positive patients showed 21 patients experiencing 100% tumor shrinkage of the target lesions.

The median duration of response in confirmed responders was 14.5 months in ALK positive non-small cell lung cancer patients treated with prior crizotinib therapy, and was not yet reached in ALK positive patients who were crizotinib naïve. Median progression-free survival was 12.9 months in the ALK positive non-small cell lung cancer patients with prior crizotinib therapy, and was not yet reached in the patients who are crizotinib naïve.

Overall, survival at one year was 77% in patients who received prior crizotinib. The projected two-year overall survival was 63%; and with 100% in patients who are crizotinib naïve with a projected two-year survival of 100%.

Finally, with appropriate caveats for the small sample size, it is notable that of the 8 crizotinib naïve ALK positive patients all demonstrated a confirmed objective response, including three confirmed response - excuse me, including three complete responses.

During the second quarter, we also announced the initiation of the ALTA 1L trial which is a randomized open-label multicenter international study designed to compare the efficacy and safety of brigatinib to that of crizotinib in patients with ALK positive non-small cell lung cancer who have not previously received an ALK inhibitor. The trial is expected to be conducted at approximately 150 sites in North America, Europe and the Asia Pacific region.

Patients in the trial must receive no more than one regimen of systemic anti-cancer therapy in the locally advanced or metastatic setting, but to not have received prior therapy with an ALK inhibitor. Approximately, 270 patients are to be randomized one-to-one to receive brigatinib at the 90 mg to 180 mg high dose or crizotinib.

The primary endpoint of the trial is progression-free survival. We expect to complete patient enrollment in the ALTA 1L trial in 2018. The trial is expected to serve as our confirmatory trial to support our application for accelerated approval of brigatinib in the initial indication of resistant disease. The trial is also expected to provide a path to potential approval as a first-line therapy, where we believe the attributes of the molecule may provide an important new option for patients.

With respect to Iclusig, during the second quarter long-term four-year efficacy and safety data were presented at the European Hematology Association conference from the pivotal Phase 2 PACE clinical trial of Iclusig in heavily pre-treated patients with resistant or intolerant chronic myeloid leukemia or Philadelphia positive acute lymphoblastic leukemia.

The PACE data showed that 82% of chronic phase CML patients who had earlier achieved a major cytogenetic response are estimated to remain in response at the four-year mark. We have submitted the four-year PACE data as the U.S. label supplement with an FDA action date in the fourth quarter of this year.

In addition, enrollment is ongoing in the OPTIC and OPTIC-2L clinical trials, for Iclusig in patients with resistant chronic phase CML. The OPTIC dose ranging trial compares 15 mg, 30 mg and 45 mg starting doses of Iclusig in adult chronic phase CML patients resistant to two or more prior TKIs and will involve a minimum follow-up of two years.

The OPTIC 2L second-line CML trial compares two starting doses of Iclusig to nilotinib in chronic phase CML patients resistant to imatinib and will involve a minimum follow-up of five years. Beyond Iclusig and brigatinib, during the quarter we also advanced our fourth internally discovered precision therapy candidate, AP32788, into clinical development for patients with exon 20 mutations in EGFR or HER2.

Like our other therapies, 788 was designed to serve a genetically defined orphan subset of cancer patients, for which there are currently no targeted treatment options, and has the potential to show rapid proof of concept early in clinical testing based on its clearly defined mechanism of action. We anticipate having preliminary data on safety and efficacy next year.

Finally, at our Analyst & Investor Day in June we introduced our immuno-oncology platform that leverages our core expertise in kinase inhibitors to the discovery and development of immunokinase inhibitors with the potential to induce and enhance anti-tumor immune responses. We have achieved genetic and pharmacologic validation on the initial target immunokinase with the program anticipated to enter lead optimization by the end of 2016. We look forward to providing further updates as this exciting program progresses.

Let me now turn the call back to Paris.

Paris Panayiotopoulos

Thank you, Tim. We hope that you will agree that the second quarter was a very productive one for ARIAD and one that in addition to a number of value-creating business positions which have strengthened our financials, as well as strong Iclusig revenue growth, moves us closer to becoming a two commercial product company by early 2017.

We’re excited about the anticipated regulatory decisions for brigatinib by early 2017; and if approved, of course, under our NDA and in earlier lines of therapy in the future, a substantial commercial opportunity in a market expected to be approximately $2 billion in 2020.

In the second quarter, we also had a number of significant potential future growth drivers for Iclusig, including the expansion of our field teams, the presentation of the four-year PACE data, as well as progress in our clinical programs to expand into earlier lines of treatment for CML and for Philadelphia-positive ALL. For both Iclusig and brigatinib, we believe we have products with a competitively differentiated profile and substantial opportunities for expanded use into new lines of treatment, as well as new indications.

Our vision is to become the industry leader in the discovery, development and commercialization of precision therapies for rare cancers. Over the past decade, molecular genetic analyses have generated a growing number of unique and clinically relevant mutations that might be targetable by precision therapies. As we look to the future for ARIAD, in addition to Iclusig and brigatinib, AP32788 is a great example of exactly such a drug candidate that we believe can potentially serve a new population of rare cancer patients in desperate need, and for which the Phase 1/2 study readout is next year.

In closing, we are committed to a company vision that we believe will allow Ariad to become a fast-growing, oncology-focused biotech company with an industry-leading pipeline of precision therapies for rare cancers.

And with that, Operator, please open the line to questions.

Question-and-Answer Session


[Operator Instructions] Our first question comes from Eun Yang with Jefferies. Your question, please.

Eun Yang

Thank you. Good quarter. So, when we look at Iclusig price increases this year, it’s already about 26%. Is that the level of price increase that you’re expecting for next year, and is it sustainable? And can you also give us year-over-year as well as quarter-over-quarter Iclusig volume growth? Thanks.

Jennifer Herron

Yes. Eun, this is Jennifer. Thanks for the question. So as you referenced, in Q2, we increased the price 8%. In terms of forward guidance, we’re not going to be giving forward guidance on pricing strategy or future price increases. I will mention, though, that ARIAD remains committed to ensuring patient access and affordability for all appropriate patients, who may benefit from our precision medicines. And as we - as Manmeet mentioned, the year-over-year - the Q2 year-over-year growth was 51% of which 31% was driven by volume. Quarter-over-quarter, it was 31% of which 20% is driven by volume. Thank you.

Eun Yang

Thank you.


Thank you. Our next question comes from the line of Chris Shibutani with Cowen. Your question, please.

Chris Shibutani

Thank you very much. Nice to see Iclusig stabilizing and progressing in the U.S. I did want to focus my question, though, on brigatinib. With the good progress in terms of the second-line trial, first-line indication, we learned from ASCO, as well as your analyst meeting, that there’s some investigator-sponsored work that’s being done that could even further broaden the opportunity. Two studies in particular looking at alectinib failures, which I think are expected to start in the third quarter, as well as in the ROS1 mutant.

Can you just update us on how you think the timelines would be for those two studies, and how you think those would fit within the longer term strategy in terms of the brigatinib opportunity? Thanks.

Timothy Clackson

Thanks, Chris. This is Tim. I’ll take that question. So not too much of an update since the Analyst Day, but I can give a little bit more color on the trials. You mentioned two investigator-sponsored studies in the post-alectinib setting. So let me clarify that what we talked about at the Analyst Day is that there is an investigator-sponsored trial that will start imminently that is looking at patients in the post-second gen setting. So that would include patients who’d experienced failure of alectinib, but also of other agents, notably crizotinib as well.

We also talked about a planned company-sponsored trial that would specifically be in the post-alectinib setting. And we’ll give more guidance once that trial is underway, but obviously we’re driving towards that with this batch. We see that as an important setting for data generation. We also have an IST in the ROS1 setting and we are contemplating activity generally in that area. As a reminder, brigatinib does have potent ROS1 activity. Alectinib does not have any ROS1 activity. And there is an approved agent in crizotinib, at least in the U.S.

So that’s the landscape into which we’d like to explore the potential role of brigatinib as a ROS1 inhibitor. We do have limited data from our Phase 1/2 trial, including one patient who responded in the crizotinib naive setting, but obviously we’d like to expand that experience further. And we remain very nimble in looking at our overall trial development activity. You may remember the slide from the Analyst Day, where we detailed a number of areas in which we’re interested in exploring in collaboration with investigators, including those translational studies that might further illuminate the potential pan out activity that we see pre-clinically in the clinical setting.

Chris Shibutani

Great. For my follow up, to keep it on the pipeline for 788, the enrollment is progressing. Can you just characterize how that’s going and characterize the enthusiasm in investigators with that as well? Thank you.

Timothy Clackson

Sure. I’m sure you realize I can’t give you a blow-by-blow account of enrollment. But I can say that there is a lot of interest from physicians. In no way are we needing to wait for patients to enroll. And as you know in these early stages of the trial typically, in a successful trial, the very limiting step is simply waiting for the DLT period of one - four weeks to continue, and that’s basically where we are. There are exon 20 patients out there in need of new therapies. And, I think, we’re seeing that reflected directly in the interest in the trial. So we really look forward to giving an update as appropriate.

Chris Shibutani

Thank you very much.


Thank you. Our next question comes from the line of Katherine Xu with William Blair. Your question please?

Katherine Xu

Hi, good morning. So the second quarter U.S. Iclusig sales grew about 14%. Was that 8% from the price increase, can you break down the volume increase versus the inventory increase that contributed to this growth in dollar amount? That would be very helpful. And I guess, Jen, how many sales reps or commercial organizations that we have right now, can you just throw us that size, the number of people. That would be very helpful. Thank you.

Manmeet Soni

Sure, Katherine. This is Manmeet. I’ll take your first question on the growth. You’re asking about Q2 of 2015 to 2Q of 2016 right?

Katherine Xu

Right. Quarter-over-quarter.

Manmeet Soni

Quarter-over-quarter. So we grew over 50% in quarter-over-quarter and as Jennifer also mentioned a little bit earlier that, primarily it was only 20% related to the price increase and the remaining 31% approximately is volume driven. And as I mentioned on the call earlier, that the impact of channel inventory which increased from seven business days, which it is used to be in second quarter of 2015 to 10 business days. If you look at the proportional impact that was only $1.4 million on the channel inventory.

Katherine Xu

Sure. And then from the second quarter 2016 to first quarter 2016, the quarter over the previous quarter.

Manmeet Soni

Okay. So your last one, sequential quarter, so sequential quarter we grew 30% and 8% was the price increase in fact and the remaining 22% is the volume growth. And if you exclude this $1.4 million, right, that’s part of the 22% growth.

Jennifer Herron

So if I could comment on the field force build out, and really the commercial organization, which we’re including customer-facing teams both on the medical side and on the field force side. As we are evolving our organization from a one-product company to a two-product company, and getting ready to compete in a very competitive space in the ALK positive lung cancer market.

We have been very deliberate in looking at analogs in the marketplace in terms of who we’re going to be competing against, and looking at the synergies that we have across our portfolio and building out the commercial teams, both on the medical side as well as on the field force side. We have not previously disclosed the exact number of our field force, and at this time, I’m not at liberty to do that. But what I can tell you is that we are confident that we have the right organization in place that we have staffed our customer-facing organization appropriately. And we are ready and poised to compete for when we get FDA approval for brigatinib.

Katherine Xu

And then, if I could have a follow-up to Tim. I’m just curious about the synergy - potential synergy between targeted agents and I-O agents. Have you guys looked at Iclusig or brigatinib information with your all I-O agents and see any synergies or additive activity?

Timothy Clackson

Yes. We follow that closely, and especially with brigatinib where there is a lot of discussion about the relative roles of checkpoints and TKIs. And it’s, to date we’ve - the pretty unanimous feedback that we have from our advisors, not scientists internally but particularly from experts in the field - is that there really isn’t a rationale right now for checking - for testing - for expecting a major amount of synergy between those two agents. The overwhelming activity that you see in the brigatinib, this is in the outspace is in - is with direct TKIs. Opdivo can be used in late-line settings, but there’s really no evidence of meaningful clinical activity for checkpoints in that setting, given that ALK is a really sort of big genetically pure tumor with limited burden of new antigens.

Having said that, we follow the field closely, and we would not be averse to thinking about potential explorations of that, for example, in the investigator setting. And with Iclusig, kind of a similar response, we follow that closely, but there are no ongoing trials at this point directly looking at that activity.

Katherine Xu

Thank you.


Thank you. Our next question comes from the line of Anupam Rama with JPMorgan. Your question, please.

Anupam Rama

Hey, guys. Thanks so much for taking the question. A quick one of brig, with the anticipating NDA filing completing here by the end of the quarter. Just what are the final gating factors here to completing the submission? And then quick one on the four-year PACE data. How are you thinking about what the change might do in terms of shift in uptake and prescription behavior here, given that part of the data set includes the maintenance of response with dose reductions, and how should we be thinking about a specific change to the recommended dosing and the label. Thanks.

Timothy Clackson

So I can take at least the first one. Thanks for the question. So really just execution from the point of view of the NDA. We’re on track with the guidance that we’ve given that the submission will be completed this quarter. Obviously that reflects a ton of work, but we are well on track. There’s no particular gating items at this time, except a completion at the final modules, which will be the clinical modules, which will be submitted later this quarter. Obviously we’ll give more color on the exact timing and the resulting expected PDUFA date once we have that following the final - the submission. And then for the four-year data question initiative, I can let Jennifer respond, and if need be, comment on the expected label.

Jennifer Herron

Yes. So thanks for the question. So with regard to the PACE data, we are very excited about the opportunity to update the U.S. prescribing information with the four-year follow-up data for the PACE trial. We believe that the impact, the commercial impact is ultimately going to depend on the information that we’re able to incorporate into the new label. And that’s currently underway in negotiations with the FDA.

We do expect, though, that the updated information will provide greater context for physicians if they’re considering treatment options for appropriate patients. And remember or recall that in our current prescribing information, we have only 10 month efficacy data and two year safety data.

And so with this update, we do believe that physicians will have a greater confidence and context in which to dose their current patients and have new patients starts with the idea of a four-year follow up for these CML patients. In terms of dosing, we have other sources of data that support what we’re seeing in PACE, and that response can be maintained with lower doses of Iclusig. And we believe it’s in the best interest of prescribers and patients to, when the patient gets into response, to dose reduce to really maximize that benefit-risk ratio.

Timothy Clackson

And if I can just extend on that comment. The four-year PACE data incorporates the long term experience of dose reduction with on the average about the two-year time point patients largely having been reduced mainly to the 15 milligram dose point. So the really striking retention of response, and the fact that patients remain on therapy at the four-year time point, is intrinsically reflective of those reduction decisions.

The current label doesn’t have a specific dose to which patients should be reduced, and that may well be the case in the updated label. But by virtue of incorporating the four-year data, there will be clearly a much greater context around the actual clinical experience we have with patients being reduced long term.

Anupam Rama

Great, thanks so much for taking our questions.


Thank you. Our next question comes from the line of Michael Yee with RBC Capital Markets; your question, please.

Jue Judy Liu

Good morning. Congrats on the quarter. This is Judy Liu on for Mike Yee at RBC. I have got two questions if you don’t mind on brigatinib. So with regards to the guidance on completing ALTA 1L timing, I was just wondering how does this compare to alectinib, for example Roche had in their slides that ALEX 1L, they expect data in early 2017? So I know you’re going to do interims on your ALTA 1L study. But could you stop the trial early at one of the interims, like so - Roche would see data in early 2017 and you might come on in 2018? Or how should we think about this? And how do you think this one year difference or more might impact your market opportunity here?

Timothy Clackson

Sure, well, with respect to the overall timing of the trial, you’re correct, that we’re guiding to completion in enrollment in 2018. And as you noted, Roche commented on the potential timing of data at least from the - or at least the top-line from the ALEX trial in early next year. We assume that there will be a data presentation following and then you have to factor in the timing for regulatory filings and submissions. So that needs to borne in mind when thinking about the alectinib timing.

We’re certainly aware that they’re ahead. We also believe we have the better asset and so it will be incumbent on us to really drive that advantage, and obviously to execute as quickly as we can on the ALTA 1L trial. What we’ve guided on the structure of the trial is that, as mentioned in the analyst day, there are interim looks driven by events, 50% and 75% of events. We haven’t guided beyond that to exact timing.

Typically we would not do an interim analysis prior to full enrollment. So while there is a possibility of having those interim readouts shortly after full enrollment, at this time we can’t guide to anything more than that. We are clearly focused like a laser on getting patients into the ALTA 1L trial as quickly as we can, which is why we’re opening a large number of sites and really driving that with a good hockey stick. And we that as key to competing quickly against alectinib.

Jue Judy Liu

Okay, thank you. And then my second question is also with regards to brigatinib. I hear you on being launch-ready, but does this mean you’re going to also build out a European sales force, especially now that you got rid of the Iclusig EU infrastructure? How should we think about the European opportunity for brigatinib? Thank you.

Hugh Cole

This is Hugh. Hi, good morning. I’ll speak to that. So based on the strength of the brigatinib data we certainly intend to make it available to patients around the world, not just in the U.S. We’re already working on the European marketing authorization application, which we plan to submit early next year. And we’re also establishing an early access program in Europe.

Given that we’re now focused our commercial operations on the U.S., as part of our new strategy, we would certainly intend to work with one or more partners to bring brigatinib to patients outside the U.S. We’ve had a lot of interest to that point, had a lot of interest from potential partners based on our data. And our priority, of course, is doing the best possible deal or deals for our shareholders.


Thank you. Our next question comes from the line of Jonathan Eckart with Barclays. Your question, please.

Bryan Czyzewski

Hi, this is Bryan Czyzewski on for Jon. Just following up on the brigatinib questions here, can you give us a general walkthrough of the timeline of when we could see potential additional expenses associated with the brigatinib launch? Thank you.

Manmeet Soni

Your question is more on U.S. launch, right?

Bryan Czyzewski


Manmeet Soni

Yes, so I think as we mentioned that we have already expanded our field force in second quarter of 2016. So our expenses for 2016 already include the brigatinib launch expenses. And for 2017, as you know, we will see some savings from the Incyte deal, because we recorded first five months of expenses for 2015. So should be pretty good enough with our current base-line, which we guided $120 million to $125 million for this year. And for next year, we will provide the numbers while discussing our year-end call.

Bryan Czyzewski

Thank you very much.

Manmeet Soni



Thank you. Our next question comes from the line of Eun Yang with Jefferies. Your question, please.

Eun Yang

Thank you for the follow-up. So on Iclusig I assume there is a milestone payment associated with approval in Japan. Is the milestone related to approval or commercial launch? Have you disclosed the amount? Thanks.

Manmeet Soni

Hey, Eun, this is Manmeet. We have not disclosed the amount for milestones and it’s based on approval I can say, but there are lot of other things which we have not disclosed. As it progresses we will let everybody know.

Eun Yang

So current revenue guidance does not assume any contribution?

Manmeet Soni


Eun Yang

Okay. Thank you.

Manmeet Soni

That’s right; $170 million to $180 million only includes our product revenue and royalty revenue from Europe. It doesn’t include any other milestone revenue. That would be a separate line item and we most probably incur in your license and other revenue line items.

Eun Yang

Thank you.

Manmeet Soni



Thank you. Ladies and gentlemen, this is all the time we have for questions today. I would now like to hand the call back to Paris for closing comments.

Paris Panayiotopoulos

Thank you, operator, and thank you to everyone for joining our call this morning. When the CEO doesn’t have a need to answer any questions, it’s clearly a sign of an accountable, passionate and high-performing team. We look forward to seeing you or talking to again very soon. Thank you.


Ladies and gentlemen, this concludes today’s program and you may all disconnect. Everybody have a wonderful day.

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